--Vertex to eliminate 15% of its workforce after disappointing
sales of its drug Incivek
--Third-quarter loss and revenue decline fall below analysts'
expectations
--Vertex will focus its efforts in expanding growth through it
cystic fibrosis drug franchise
(Updated throughout with added details.)
By Joseph Walker
Vertex Pharmaceuticals Inc. (VRTX) will trim its workforce by
15% and re-orient its research and development after sales of its
hepatitis C drug Incivek plunged by two-thirds in the third
quarter.
The company posted a loss of $124.1 million, or 54 cents a
share, in the quarter amid a 34% decline in total revenue. The
results were far below analysts' expectations and shares of Vertex
fell 4.9% to $74 in early trading Tuesday.
The retrenchment of one of biotechnology's most followed
companies illustrates how suddenly promising new drugs can be
eclipsed by competitors' advances. Many patients with hepatitis
C--which can take years to harm the liver--have delayed treatment
with Vertex's Incivek in anticipation of a new therapy with fewer
side effects and greater cure rates going onto the market later
this year. The company expects the declines to continue.
"We reached a point where our level of investment and support
for Invicek was beyond what we believe is necessary to support
future physician and patient demand," said Chief Executive Jeffrey
Leiden in prepared remarks during a conference call with
analysts.
Vertex also cut its 2013 revenue outlook to $1 billion to $1.05
billion, from its previous estimate of $1.1 billion to $1.2
billion.
In all, the company expects the layoffs to total 370 positions,
many of them sales jobs and other supporting roles for Incivek.
Vertex's remaining workforce of 1,800 will focus on cystic
fibrosis, the rare lung disease for which Vertex has developed a
leading drug franchise.
The potential for the company's cystic fibrosis treatments have
helped push the company's share price up roughly 75% this year.
Sales of Vertex's currently approved drug, Kalydeco, more than
doubled to $101.1 million in the third quarter, and analysts
project annual sales of $1.82 billion annually by the end of 2016,
according to FactSet Research.
Vertex is developing additional treatments that could greatly
expand the number of patients treated with its cystic fibrosis
drugs. Mr. Leiden said the company would continue to develop other
drug candidates for hepatitis C, but said that staff reductions
would enable Vertex to "focus our investment on key programs in
cystic fibrosis and other diseases to position the company for
future growth."
The majority of the job cuts will be made in the company's home
state of Massachusetts and will reduce operating expenses by $150
million to $200 million next year. The company expects to incur
restructuring charges of $35 million to $45 million this year.
Incivek was approved in 2011 for use in combination with two
existing drugs, one of which--interferon--requires frequent
injections that carry flu-like side effects. Sales in the quarter
fell $85.6 million, down from $254.3 million a year ago.
Last Friday, an advisory committee to the U.S. Food and Drug
Administration unanimously recommended approval for a new hepatitis
C drug developed by Gilead Sciences Inc. (GILD). The drug,
sofosbuvir, could be approved by mid-December and will eliminate
the need for interferon in some patients. Sofosbuvir, as well as
rival experimental treatments, are expected to eventually eliminate
interferon for all people infected with the hepatitis C virus.
Mark Schoenebaum, an analyst with ISI Group, said he was pleased
that the company "made the difficult decision to cut" costs related
to its hepatitis C program. "This now sets the company up for
massive long-term operating margin leverage should its efforts in
[cystic fibrosis] be successful," Mr. Schoenebaum wrote in a
research note to clients.
--Tess Stynes contributed to this report.
Write to Joseph Walker at joseph.walker@wsj.com
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